Dollar-yen at 102 (not 100) is more crucial: Charts

Contrary to popular perception, the important number for dollar-yen is 102, and not 100, according to technical analysis. This is the most powerful support and resistance level on the long term-chart. It has acted as a support level in 1994, 2000, 2005; and as a resistance level in 2009. And as the currency pair flirts with the 100-level, the 102 mark is once again a decisive level for the dollar-yen.

The monthly chart shows another resistance level near 107. This is not as strong as the 102 level but is consistent enough to be able to use it to define a consolidation band. Historically, as dollar-yen breaches the 102 level it has traded in the 102-107 range. This suggests that any current breakout above 102 has an immediate upside target near 107.

The surprising conclusion from the activity on the monthly dollar-yen chart is that the psychologically important 100-level is in actual fact, not that significant, and offers no strong barrier to movements in the currency. It also suggests that the current dollar-yen move above 100 is nowhere near as important as a move above 102.

What's behind the yen strenghthening?

David Mann, Head Regional Research, Asia at Standard Chartered Bank, explains the yen's strength following the upper house election in Japan.

So where is the support below 102? Resistance near 95 has been well established; it acted as a support level in March and August 2009, and a resistance level in April 2010. This has been a major feature of the market since the last global financial crisis. Once the 95-level was breached in 2013, it became a strong support level. When it was acting as a resistance level, dollar-yen took several weeks of consolidation near this resistance prior to developing a breakout.

The dollar-yen has spent a long time historically above the 100 level. A new move above 102 has the potential to become part of this longer pattern of behavior. A break above 107 will confirm this.

Any breakout above 107 has a longer-term upside target near 111. This has acted as a resistant level in 1994, 2000 and 2004, and as a support floor in 1997, 1998 and 2006.

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